Can the retirement-consumption puzzle be resolved?: evidence from the British Household Panel Survey.

Smith, Sarah
(2005)
Can the retirement-consumption puzzle be resolved?: evidence from the British Household Panel Survey.
Discussion paper: UBS Pensions Series 033,
528.
Financial Markets Group, London School of Economics and Political Science, London, UK.

Abstract

This paper uses data from the British Household Panel Survey to shed further light on the fall in spending at retirement (the “retirement-consumption puzzle”). Comparing food spending for men retiring involuntarily early (through ill health or redundancy) with spending for those who retire voluntarily, it finds a significant fall in spending only for those who retire involuntarily. This is consistent with the observed fall in spending being linked to a negative wealth shock for some retirees. Evidence on psychological and financial well-being also indicates that the retirement experience of involuntary retirees is very different to that of voluntary retirees.